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The six-year statute of limitations for private rights of action under the False Claims Act also applies to the Medicaid Secondary Payer Act, the 2nd U.S. Circuit Court of Appeals has ruled. The decision came in one of the longest-running workers’ compensation cases on record — and was issued 39 years after plaintiff Robert Manning fell from a utility pole in upstate New York and was paralyzed for life. The court’s ruling in Manning v. Utilities Mutual Insurance Co., 00-9219, reinstated Manning’s claim that his insurance company should have paid for his medical care under the Medicaid Secondary Payer Act (MSP). In a decision by Judge Robert Katzmann, the 2nd Circuit also said that a lower court should allow Manning to amend his complaint to allege “more sufficiently” a claim for bad-faith refusal to pay insurance benefits. For the first six years following Manning’s accident, Utilities Mutual Insurance Company (UMI) paid the workers’ compensation benefits needed to cover his medical expenses and ensure he received round-the-clock nursing care. When Manning won a $388,000 judgment against New York Telephone Company, UMI received a lien for workers’ compensation benefits already provided and ceased paying benefits while Manning’s expenses were being covered by the judgment. But Manning exhausted the monies from his recovery in 1973, and when he asked that his workers’ compensation benefits resume, UMI refused on the grounds that the money recovered from New York Telephone Company had not been exhausted. Medicare began covering some of the costs of Manning’s medical care and treatment. Also in 1997, Manning reached a partial settlement in his dispute with the company — 24 years after UMI failed to resume his benefits — before the New York State Workers’ Compensation Board (WCB). While his $1.9 million settlement included a release of all claims within the exclusive jurisdiction of the Board, Manning reserved the right to litigate other claims in state or federal court. FRAUD CLAIMS Manning sued in 1998 charging that UMI acted in bad faith to defraud both himself and the Medicare system. His lawsuit in the U.S. District Court for the Southern District of New York sought two times $876,321 under the Medicaid Secondary Payer Act, 42 U.S.C. Section 1395y(b) (2000) — for the cost of his medical care since 1992, which he alleged should have been paid by the insurance company. Manning also sought more than $10 million in compensatory and punitive damages based on the company’s alleged bad faith. Federal Judge Richard Casey of the Southern District dismissed Manning’s fraud claim. The judge also dismissed the secondary payer claim, finding it time-barred. Because the Medicaid Secondary Payer Act (MSP) is silent on a statute of limitations, Casey said the appropriate statute of limitations is found by borrowing from the “most closely analogous” state statute to the MSP, which Casey found to be three years. But on the appeal, Judge Katzmann said, “plaintiff asserts that because there is a more closely analogous federal statute, the federal False Claims Act, the limitations period from that analogous federal statute should apply to private actions brought under the MSP.” “Ultimately, although it is a close question, we agree with plaintiff,” Katzmann said. Katzmann said that the False Claims Act allows both the government and private citizens to sue to recover monies “erroneously paid to those who defraud the government by submitting or collecting falsified claims.” “The FCA is similar to the MSP in that both statutes allow individual citizens, as well as the government, to sue in order to right an economic wrong done to the government,” he said. “Both the FCA and MSP allow for a multiplier of damages to enable the government to recover its funds while also providing a financial incentive for private citizens to bring such suits.” Moreover, Katzmann said the similarity is heightened by the fact that courts have “recognized FCA claims against insurers based on violations of the MSP.” And even though procedural differences exist between the two statutes, they are more clearly analogous than the MSP is to any relevant New York State statute. Katzmann also noted that, because the government has created a private right of action to aid in the recovery of money erroneously paid by Medicare, “there is a federal interest in having a longer statute of limitations apply to MSP actions,” — an observation supported by the legislative history. The court affirmed Judge Casey’s decision to dismiss Manning’s claim for fraud, but said Manning should be allowed to amend his complaint. Casey had dismissed that claim because the complaint failed to allege “reliance on the misrepresentation of a material fact.” The 2nd Circuit agreed, but said that one of the counts in the complaint “may be broad enough to encompass a claim against defendants based on their bad faith refusal to pay benefits,” in part because the company refused to pay benefits for 24 years while allegedly knowing that Manning was eligible. “Plaintiff’s briefs also recount how defendants refused to pay despite repeated orders from the WCB and New York appellate courts to do so,” Katzmann said. “Such refusal is allegedly even more egregious in the face of plaintiff’s severe disability and financial hardship.” Therefore, he said, the interests of justice “strongly favor” allowing Manning to replead. Judges Amalya L. Kearse and Jose A. Cabranes joined in the opinion. Kenneth Pasquale and Heidi Balk of Stroock & Stroock & Lavan represented Niagara Mohawk Power Co. Stuart C. Levine and David A. Beke of Ford Marrin Esposito Witmeyer & Gleser represented Utilities Mutual Insurance Co. Kenneth F. McCallion and Rajan Sharma of McCallion & Associates represented Manning.

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